SLOW EXPORT GROWTH, DOMESTIC DEMAND RESILIENT BUT HIGH INFLATION HURTS REAL INCOME
In annual terms GDP-growth slowed down during 2012; from 4.9% in the first quarter to 2.9% in the third.Seasonally adjusted and compared to the previous quarter, growth was more even during the year with the thirdbeing the strongest.
Forward looking indicators are in line with diverging hard data showing a
weak external and industrialproduction performance at the same time as services are more resilient
. The composite purchasing managers’index (PMI) fell in the two last months 2012 from 53.7 in October to 52.2 in December; the outlook is a bit weakerbut still above 50. PMI for services on the one hand stayed just above 55 for the third month in a row at the sametime as PMI for manufacturing industry dropped for the second month in a row to 50.0.
Monthly data on i
ndustrial production is on a sideways, slightly weakening, trend
. Exports fell by 4% innominal prices in October 2012 and were according to national accounts roughly unchanged during the first 3quarters 2012 compared to the same period 2011.
capital spending is increasing at a slower pace
, but data available for 2012 still shows a healthy increase. Inthe third quarter 2012 gross capital formation according to the National Accounts increased by 9.3% y/y, down froma 22.9% increase the same quarter 2011. PMI for new orders dropped in December 2012 to the lowest level sinceOctober 2010 in combination with a weak international outlook point at a continued slowdown in investments.There are factors pointing at investments continuing to increase though. Bank lending is increasing but at a slowerpace, especially in foreign currency. In Roubles the increase was still more than 25% on an annual basis in October2012. Low investment and a low investment ratio for a number of years and official policy to promote increasedinvestments will support the development going ahead. High capacity utilisation also supports investments ahead.
Consumer confidence dropped during 2012 as inflation increased, eroding real wages and household purchasingpower. Last months have seen an improvement though and retail sales have been growing at a steady 4-4.5% y/ythe last months of 2012. Lower inflation in the second half of 2013 will boost real income and support an increase inconsumption expenditure, but we expect lower wage increases and fiscal stimulus in the years ahead compared toprevious years.